Transportation networks in the United States should provide efficient traffic flow conditions to facilitate the movement of people and goods. The current system for funding transportation, however, does little to directly address congestion and system unreliability, which have steadily gotten worse in urban areas in the United States over the last 25 years. According to the Texas Transportation Institute, the hours of delay per traveler on urban U.S. highways from 1982 to 2005 increased by 171.4 percent, the total hours of delay increased by 425 percent, the total fuel wasted increased by 480 percent, and the total cost of congestion increased by 382.7 percent.95 At the same time, the total amount spent on highways and transit by all levels of government, Federal, state and local, almost doubled in real terms. For highways, spending increased from approximately $79 billion in 1982 to approximately $134 billion in 2004, and for transit, spending increased from approximately $25 billion in 1982 to approximately $48 billion in 2004.96 Despite massive investment of public funds, performance continues to deteriorate.
PPPs respond to the poor performance of U.S. transportation systems by providing high-quality, well managed projects that reduce congestion. A recent GAO report indicated that transportation agencies are developing partnerships with the private sector to help fund congestion mitigation techniques, and that "working with private companies can offer a number of benefits for the transportation agency, such as expediting the project schedule, reducing costs, and providing access to private funding sources."97 The report also asserted that "[p]rivate companies, driven by the need to make a return on investment, are incentivized to manage assets and provide services in efficient ways" and that specific performance standards can be included in concession agreements to ensure that roads are maintained to a specific standard.98
PPPs have been trailblazers in the innovative use of direct user fees and variable pricing to reduce congestion. Because direct user fees can be varied to reflect different traffic conditions, pricing can expand capacity by encouraging drivers to use facilities during non-peak periods and to use transit and other transportation alternatives during peak periods.
The first application of variable pricing in the United States, California's SR-91 Express Lanes, was privately financed and designed and constructed through a PPP structure and has been providing a congestion free alternative in Orange County, California, since the project opened in 1995. In a 2004 report to Congress, USDOT stated that during peak-traffic periods each of the two variably priced express lanes in the median of SR-91 was providing throughput for twice as many cars (almost 25 percent of the cars on the road) as each of the four non-priced lanes on SR-91 was providing for (approximately 12 percent of the cars on the road). The report indicated that not only does pricing allow "twice as many vehicles to be served on a lane in the peak hour than the same lane without pricing," but also, "it does so at three to four times the speed on the unpriced lane."99
Similarly, the Capital Beltway HOT Lanes project in northern Virginia, which will implement variable pricing on two lanes of an expanded Capital Beltway (I-495), is being financed, designed and constructed and will be operated and maintained, by the private sector through a PPP. In these and other examples private sector innovation and willingness to assume a significant amount of technological, operational and traffic risk reduces congestion and improves system performance.
PPPs are a good fit in congested areas because existing traffic provides comfort that revenues generated by the PPP facility will support the costs of construction, operation and maintenance of the facility and provide a reasonable return on investment. This allows the private sector to finance and assume the risks associated with the development, deployment and operation of traffic-management technology in congested areas, including the risk that variable tolls will maintain a free flow of traffic. Under a traditional approach to project delivery the public sector would have to assume these risks and may have difficulty funding these projects, which can be expensive, even it was willing to do so. From a policy perspective, another important link between PPPs and congestion mitigation is that the public sector stands to gain significantly from the private sector's focus on underperforming facilities. The private sector can gather and analyze large amounts of data with respect to the performance of the Nation's transportation facilities, and this information can help the public sector steer investment towards the facilities that need it most.
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95 The 2007 Urban Mobility Report, Texas Transportation Institute, The Texas A&M University System, September 2007, Exhibit 3.
96 Trends in Public Spending on Transportation and Water Infrastructure, 1956 to 2004, Congressional Budget Office, August 2007, Supplementary Table W-7 (Total Public Infrastructure Spending by Federal, State, and Local Governments, 1956-2004 (in millions of 2006 dollars)).
97 Surface Transportation: Strategies Are Available for Making Existing Road Infrastructure Perform Better, United States Government Accountability Office, Report to the Ranking Member, Committee on Environment and Public Works, U.S. Senate, July 2007 (GAO-07-920) (the "GAO Congestion Report"), pg. 28.
98 GAO Congestion Report, pp. 33-34.
99 Report on the Value Pricing Pilot Program Through March 2004, USDOT, FHWA, March 2004, pg. 32.